Thursday, April 03, 2008

“Clearly, the U.S. economy is going through a very difficult period. Much necessary economic and financial adjustment has already taken place, and monetary and fiscal policies are in train that should support a return to growth in the second half of this year and next year.”

"The Federal Reserves decision to provide funding to Bear Stearns through JPMorgan Chase was made because, as you have heard Chairman Bernanke testify, Bears extensive participation in a range of critical markets meant that a chaotic unwinding of its positions could have cast doubt on the financial positions of some of Bear Stearns thousands of counterparties, placed additional pressures on the financial system, and caused damage that would not have been confined to the financial system but would have been felt broadly in the real economy through its effects on asset values and credit availability. "

The intensity of the crisis we now face in U.S. and global financial markets is a function of the size and character of the financial boom that preceded it. This was a period of rapid financial innovation--particularly in credit risk transfer instruments such as credit derivatives and securitized and structured products. [ ...]

The deterioration in the U.S. housing market late in the summer of 2007 precipitated a sharp rise in uncertainty about the value of securitized or structured assets. Demand for these assets contracted dramatically and the securitization market for mortgages and other credit assets stopped working.

"Where once more-marginal applicants would simply have been denied credit, lenders are now able to quite efficiently judge the risk posed by individual applicants and to price that risk appropriately. These improvements have led to rapid growth in subprime mortgage lending; indeed, today subprime mortgages account for roughly 10 percent of the number of all mortgages outstanding, up from just 1 or 2 percent in the early 1990s.

.....we must conclude that innovation and structural change in the financial services industry have been critical in providing expanded access to credit for the vast majority of consumers, including those of limited means.

This fact underscores the importance of our roles as policymakers, researchers, bankers, and consumer advocates in fostering constructive innovation that is both responsive to market demand and beneficial to consumers. "

Alan GreenspanFederal Reserve System’s Fourth Annual Community Affairs Research Conference, Washington, D.C. April 8, 2005 Speaking at a conference in Abu Dhabi...on Monday, this ignoramus , said he refused responsibility for the US subprime mortgage crisis and said he tried to warn the investment market of the risks posed by the mortgage products.“For people who say we and the rest of the Central Bank should have raised flags, I say we did,”